Ian Swanson: Council chiefs’ tough job just got a lot harder

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JOHN Swinney combined the roles of Santa and Scrooge when he unveiled his pre-Christmas 2016-17 Budget in the Scottish Parliament.

There was goodwill aplenty in his announcement that the new Scottish Rate of Income Tax (SRIT) will not mean any increase in bills and his decision to freeze the council tax.

But at the same time, the Finance Secretary made the councils feel the pain when he slashed their allocations by double What they had expected in what one senior city source described as the worst Budget for local government since devolution.

This was the first year the Scottish Government had to fix a separate Scottish rate of income tax – covering 10p of the current 20p basic rate. Mr Swinney was much mocked by opposition parties for failing to use his new power to set a rate higher or lower than the rest of the UK and instead opting to continue the same 10p.

“For years, the Finance Secretary has portrayed himself as a prisoner of Westminster austerity,” said the Tories’ Murdo Fraser. “But now that he has been given the key to the door of his cell, he has decided not to use it.”

Mr Swinney did offer a clear and reasoned explanation for not announcing a tax rise when he had the chance to do so. The new tax powers do not include putting top-rate taxes up while cutting bills for the lowest income tax-payers, so any increase would have meant a greater burden on the poor as well as the rich. There will be pressure now, however, on the SNP to pledge income tax changes when those more sweeping powers are devolved in 2017.

But however good the reason for leaving personal taxation alone this time, it does mean there is less money available. And in that traditional trick of central government facing hard decisions, Mr Swinney has passed on the job of making cuts to local authorities. They will be the ones now having to explain to voters why services they rely on are being reduced or abolished and their lives made harder.

Edinburgh was already looking at fairly drastic cuts – including up to 2000 job losses – to save £60 million next year alone. Some of the more controversial ones might have been removed by the time the council budget has to be agreed, but that will be extremely difficult now – and it must start looking for a further £15m of savings to be agreed within a month or so.

The government’s decision to continue the council tax freeze for a ninth year means the council has no option of raising more money that way to help preserve services.

But there is talk once more of reforming local government finance and scrapping or reshaping the council tax. A joint report by the Scottish Government and Convention of Scottish Local Authorities did not recommend a particular alternative, but argued the case for both property and income being taxed.

The political parties are likely to put forward their own preferred proposals in their manifestos at next May’s Holyrood elections.

But any attempt to change local taxation is a minefield. An obvious way out would be to tinker with the current system, adding more bands so the council tax can be more closely linked to property values. But anything that necessitates revaluation is sure to make politicians tremble because it means lots of people are sure to lose out. The current banding is based on 1991 valuations – with the price of new-build properties translated back two-and-a-half decades. And the new report estimated that a revaluation exercise would see 57 per cent of properties moved to a new band. That’s a lot of people likely to feel the effects – even before taxes go up.